New COVID Bill & Investment Biases
Mike: All right, everybody. Welcome. Welcome. You have to admit we've got the best playlists in town. I’d like to welcome you all to another of our chats. The main focus today is going to be our current portfolio status and the recently passed stimulus bill. With me today as usual is Doug Johnson. As you know Doug is one of the partners here at HCM and chairs our Investment Committee.
I have the same regular administrative duties to sort through. The first is that there is a Q and A button at the bottom of your screen. If you want to submit a question, you can hover over that and it should pop up. Slides are available by request, so if you would like a copy of the slides, feel free to let us know. We should have a replay of the call up on the website by this time tomorrow. So, with no further ado, let's get the show on the road.
The first thing we want to talk about is the new COVID relief bill, just some highlights from that bill. The one item, of course, that almost everyone is interested in is the direct assistance payments. This is the situation where everybody wins, or almost everybody wins, I should say. Most people are going to receive checks of about $1,400 per person in the family, up to a number of two kids.
Doug, can you move to the next slide briefly, and we have a chart here that outlines what the benefits are. If you kind of start at the bottom, a single individual will receive $1,400 and those two columns on the right are the phase out zones. Somebody will get $1,400 until their income gets up to $75,000, and then it will phase out as their income goes above that threshold. If their income goes over the amount and the column on the right, there's no benefit. If we start from the top, a married couple filing, a joint return, two people, so two $1,400 payments, $2,800. Add a child, you got another $ 1,400 payment, $ 4,200, add two kids, $ 5,600, you get the sense how this flows. Two kids is the max in terms of getting additional stimulus payments. You see the phase outs on the right. Head of household status has their own separate same benefit amount. Same benefit for kids, different phase out levels. So that's how that works. This program pretty much works automatically. You've seen in the news that the payments actually started coming last week. They're based off of previously filed tax returns and/or the current tax return, depending on what the service has. The good news is if they pay you a benefit and you are real income for 2021 winds up being too high, you get to keep the money. This is how this part of the program works.
Doug, if you want to flip to the next screen, we'll pick up where we were. One thing, just in the bold heading on the top, just is an interesting sideline. If you add up the stimulus relief that's been handed out it totals just about $ 42,000 per taxpayer. It's kind of an astonishing number. Makes you wonder how how well the economy would have been stimulated if we all just got $ 42,000 checks instead of the $ 1,400 checks. But it's not our job to reason why, and you'll see, as we talk through this, there's a lot of money going in a lot of different directions for a lot of really good purposes.
So once we get beyond the direct stimulus payments, unemployment is another big area where benefits are being distributed. Obviously, when the economy was essentially shut down by going full speed and effectively being thrown into park, a lot of people's careers were disrupted. Each of the stimulus programs has had benefits around unemployment to either pay additional benefits or extend the benefits that are being paid. There's a continuation of that logic in this bill. What we have essentially is an extra $ 300 of federal unemployment insurance that will be paid. Those payments will last through September 6th. The last set of payments were scheduled to stop just last week. Politicians work off of deadlines. The big deadline that drove the passage of this bill was the ability to continue these unemployment payments.
So that was it success. The extra $ 300 checks will flow through early September. So that was a success. Food assistance - again, another area as people's jobs have been disrupted and so forth. The issue around making sure that the lesser fortunate families have access to nutrition.
Of course, there are two big national programs for that. One being SNAP, which is the Supplemental Nutritional Assistance Program. That's the old food stamps program, and WIC, which is short for Women, Infants and Children. Both of those programs Received a great deal of funding through these stimulus programs that are being distributed now.
And of course, the big one, the one that we're focused on primarily, is financial planning from the tax provision.
The newest item was passed yesterday, and that is an extension of the filing deadline. So you remember last year, April 15th got punted to the middle of the summer. This year the service has added a month. So we're going from April 15th to May 17th for individual tax returns to be filed. Another thing under the freebie category, the tax freebies, is that the $1,400 that we just talked about will be tax-free. So families that receive, no matter what the amount is, between individual and spouse, individual, spouse, and kids, those will be tax-free receipts. Another amount of tax-free income is going to be unemployment. We just talked about unemployment benefits. For unemployment that was received in 2020, it's important to distinguish the years here because some of these benefits kick in in 2021 and others are available for 2020. The unemployment relief is a 2020 benefit.
Essentially, if you received up to $ 10,200 of unemployment, that can be treated as tax-free income. If both husband and wife received unemployment benefits, then there can be $20,400 received, tax-free. So that's a big benefit because a lot of people received some form of unemployment last year and unemployment is typically a taxable benefit. That is a big relief.
The next two elements of tax preference over tax benefits that I want to talk about involve family tax credits. The titles of these are almost identical. So one is the child tax credit and the other is the child and dependent care tax credit. Both of them have gotten about a thousand-dollar boost. If you remember at the end of 2017, the Tax Act, that was passed eliminated personal exemptions. It used to be when you filed your tax return you would add up all the people in the household and you would get a tax deduction, an exemption, for everybody in the household. That was done away with. Now, families get relief by receiving a tax credit for children, and that's this this child tax credit. Essentially what's happened is it's been increased from $2,000 to $3,000. For children under six, it's been increased to $3,600. It used to cut off for 16-year-olds; now it will be effective for people who are 17. So, the pool of beneficiaries has gotten bigger, and the dollar amounts have gotten larger That is a 2021 benefit. A benefit with a similar name, the child and dependent care credit, is for families who have children who are under 13, so 12 or younger, for whom the parents pay childcare expenses so that the parents can work. Here the qualifying expenses have been increased to $4,000 for one child and $8,000 for two or more. So again, the expenses upon which you can calculate the credit have been increased. Another tax benefit that is maybe a little bit premature in that it's only half in play, but it tells us the story of things to come, is the act includes an exclusion from income for student debt that the federal government forgives.
So normally you have debt forgiveness as a classification of ordinary income, and you would pay tax on that. They've carved out this section of income for student loans forgiven by the federal government up to $10,000. Now, when president Biden was running for president, one of his campaign promises was to forgive $ 10,000 of student debt, and he's shown himself to be very eager to fulfill his campaign promises. Now, he wants to do this on a bipartisan basis, so he wants to bring it through Congress. However, two popular senators, two influential senators, Schumer and Warren, both want that to be a $ 50,000 forgiveness, and they believe that he can make this change through an executive order. So that's still has to play out over the balance of the year, but the stage is set for that to be a $ 10,000 benefit.
The last thing I would mention in the tax area is essentially that taxes are going to be going up. There was talk about this before the election, “What would happen if one party one versus another party?” Well, what's interesting is since this law was passed and signed into law just recently, the talking heads have come out and the emphasis is now regularly on how we're going to pay for it. So, they are definitely softening the earth for tax increases at the business level, the individual level, and the investment level.
The investment level is important because when you think about what a particular security is worth, it's essentially the discounted present value of all of its future income to the investor. Well, if taxes are doubled on investments, and that's the working proposal to increase the capital gains rate from 20% to nearly 40%, then that will change present value of these future cash flows and should, at least theoretically, reduce the value of investments. So that's something that investors would have to absorb if we ever got to that point. Certainly, individual tax rates are going up on business and certainly individual tax rates are going up on highest income taxpayers, what are classically referred to as the “one percenters.” One of the things that president Biden did promise is that no one who had income under $400,000 would see an increase in their taxes. Yet all through the campaign, and even as of yesterday, they refuse to answer whether that's $400,000 for an individual or $400,000 for a family, which would make a big difference.
Just a couple of other things I want to touch on besides tax provisions. Obviously, one of the most contentious issues when this was being discussed in the Senate was benefits being paid out to state and local governments. That did pass; there's $ 350 billion going out to state, local, and tribal governments. Pretty much self-explanatory. Not a lot of strings tied to that money, as I understand it.
And finally, public welfare. So, a lot of money is going to be going into COVID research, follow up, tracing, and research to help identify and deal with future outbreaks, similar to COVID.
Also, the government will pick up the COVID-related COBRA payments. So if somebody loses their job because of COVID and wants to stay on their employer’s healthcare, of course that's COBRA, but the employee has to pay those premiums. Well, the government will step in and pay those premiums for you. The last thing I wanted to mention is there are billions of dollars going into housing-related programs, rental assistance, and things of that nature. So that summarizes the comments I wanted to make about the COVID bill.
Doug: So Mike, before we transition, we had a question come in that was somewhat tax-related, so I wanted to go ahead and address that now. The question was: will the state delay their filing deadline along with federal?
Mike: So we don't know the answer to that question yet. The presumption is yes. Last year when the Feds extended, they had extended for weeks or maybe a month before the state started to get in line. A lot of the state statutes, the way they read, their filing deadline is directly referenced to the federal deadlines. So, it's an easy slam dunk conclusion that that will be the case. However, I peeked earlier and I did not see any announcements from any states or any of the services that we follow, but I’m sure it will be the case.
Doug: So market related. So over the past, I’d say two or three weeks, or since we last visited, there's been a pretty big move in interest rates, and subsequently you've heard more chatter about inflation-related items. So those are two of the topics that are going to resonate with a lot of the things that looked at today, and the first being this idea that this recovery is probably a little bit different than recessions in the past, mainly due to the fact that past recessions have been an issue of domain. Whereas this has been an issue of both demand and supply because the supply chain is essentially been shut down along with the demand aspect in certain sectors. So the concern is that coming out of this, you're going to see a snap influx in demand as everything opens up while the supply chain is going to have difficulty catching up. Historically, that results in too much money chasing too few goods, otherwise known as inflationary pressures. So we can already see here from just looking at industrial production around the world, here is the great Financial Crisis. So it took much longer, maybe not much longer, but longer for the trough to happen, but then the recovery was slow and steady. Whereas during COVID, the drop was very swift, but the recovery has also been very swift on a production line because again, the demand can just kind of turn back on. And especially with all these stimulus payments that we have coming into the economy, people have a replacement income for those who have lost their jobs, and even for people who actually haven't lost their jobs. I understand this chart's a little bit small, and it may be hard to see, but this shows purchaser, manager, index, and supply delivery times. So, a quicker delivery time is a faster supply chain and longer delivery times are a slower supply chain. Now, I don't know why this chart is set up the way it is. It seems somewhat counterintuitive to me, but as this line goes down, it means that the delivery times are longer, the gray bar is a global perspective and then obviously the maroon or reddish purple is going to be the respective countries or regions.
So here you have mainland China, not too bad compared to the rest of the world, but then you look at the US and Germany and we see really long wait times for delivery. Now you're looking at input prices, so direct corollary here to inflationary pressures that could eventually be passed on to the consumer. Now, this one is pretty intuitive. As the line moves up, the prices being paid are rising. So again, China is still a little bit behind the rest of the world, but then you've got the US and then you have Germany. Seeing increased input prices across the supply chain. Finally, the chart at the bottom: this shows ships that are in San Pedro Bay and then the ports of Los Angeles and Long Beach. A tremendous amount of freight runs through those specific ports, and you have red at anchor and then blue at birth. Basically, you can see these lines both moving up, meaning that all of the goods that are on these ships can't necessarily be offloaded and move through the system, and that's only exacerbating the delay in the supply chain that we've seen so far.
So that is certainly starting to put some inflationary pressures into the market now. Subsequently, Chairman Powell kept a straight face yesterday and kind of insinuated that they didn't see a lot of inflation or the inflation that they saw was somewhat transitory in his prepared remarks. But we can all agree that if you go to the supermarket or if you try to buy a home that there's certainly inflation in the economy, it just may not be in the measurements that have historically been used through CPI.
Now there's also been a lot of talk, both in the media and in these webinars, about the transition between the return profiles of growth versus value. We've seen a pretty solid rotation from growth to value that we're going to continue to talk about, but a lot of people have wondered “How much further can this go?” Well, here's a chart that goes back all the way to 1995 and it shows the NASDAQ 100 relative to just the S&P 500. So this is just a broad market, it's not necessarily a measurement of values so to speak. So here we have the peak of the tech boom back in the late 90s/early 2000s, and then obviously the fallout of that. And then for, I’d say probably to the trough of the great financial crisis, you saw the NASDAQ 100 move pretty much in concert with the S&P 500. So there's this line that goes straight across, not a whole lot going on. You get the trough of the Great Financial Crisis. You get rates that are pulled down significantly. You also get financial stocks that are sucked into this whole mess. And all of a sudden, you start to see the NASDAQ outperformance going a slow and steady line all the way up to the beginning of the pandemic. And then you've seen this explosion in performance for NASDAQ relative to the S&P 500. And then just recently you've started to see that drop take place. But, if you want to get a visual on where we are in terms of relative returns or “how far can this go?”, this gives a good visual that there's still a lot of room for there to be a reevaluation of growth versus value, and we're starting to see that play out in the market.
So one of the questions that I’ve seen kind of floating around is “why is it that higher rates are affecting growth relative to value?” So it starts with “why is it the rates move higher?” Two reasons. First of all, just flat-out economic growth. So basically the expectation is demand and services are going to be high, or they're going to be increasing. We've laid out that the easy monetary policy stance of the Fed combined with the stimulus from the government, combined with covid cases dropping, vaccines increasing, really increases the probability that we're going to get a more permanent reopening. And as that permanent reopening takes place, we should see jobs added, we should see money injected back into the economy, and we should see growth improve significantly. So that would take care of item one.
Now item two: inflation. So you have the erosion of purchasing power in the future, demanding a higher rate of interest today. So think about a dollar today is not going to be worth as much as it is five years from now if inflation picks up significant. So those are the two things that are ultimately going to drive rates higher. Now, one can actually cause the other, but the other can't necessarily cause the first. So if we have a boom in economic growth, we could also see an increase in inflation. Very rarely do you see an increase in inflation solely responsible for an increase in economic growth, but what we're seeing right now is you're seeing both of these things kind of play themselves out at the same time. There's obviously expectations for growth, but I think there's also expectations for inflation being built in. So you've got this kind of tug of war on which one is going to be the good driver, which would be number one versus the not so good driver, which would be number two, and which one of these things is going to dominate? Now, in terms of growth versus value, the best way to think about this is that growth businesses are considered long-duration assets. So that means that most of the profit from the business is expected sometime in the future. So that the chart we're going to look at at the very end of the presentation is going to illustrate this really well. But we're not necessarily talking about the Amazons and Microsoft, the Facebooks. Those companies make money, and they make a lot of it. These are kind of these fringe growth assets that really haven't generated any profits, but they've created very compelling narratives along the way, and they've pulled a lot of assets. Whereas on the value side, those are considered short duration, so meaning most of the profit has already been established and is being generated currently by the earnings or dividends. So in an inflationary environment, money is worth more now than it will be in the future; therefore, the cash flows that are being generated in the immediate future on the value side are going to be more more valuable, so to speak, than those on the growth side. And as we've seen rates moving higher, we've certainly seen a dispersion being created between growth or NASDAQ indexes being hit versus value, or if you want to use the Dow as an example, but value specifically, the value sectors, have maintained pricing power in this choppy market, and they've actually increased as well. So we think that if rates continue to move higher, it should still continue to play into the value trade while most likely continuing to negatively affect the growth traits so to speak.
To see this visually, this is value versus inflation. So the legend on the left here basically shows the annualized out-performance of value versus growth. So when we see numbers above zero, that means value outperformed growth, and below, vice versa. And then we have decades going back to, I believe the thirties on here, and then the annualized inflation rate here at the bottom. So what you can see is almost every period that we've had up here, we've had significant value outperformance against growth has also been accompanied by an inflation rate that's been north of two. The one exception is in the nineties, and if you remember the first graph that we looked at, a lot of this had to do with the fact that the tech boom at the end of the decade skewed this return. So if you take the tech boom out of it, this number is probably somewhere up here, and then obviously the 2010s, when rates were significantly low, you had a big growth outperformance, and then in the thirties, when you had the Great Depression, rates were pulled down growth assets also outperform them. So if we're thinking about inflation, we can see here visually that value is most likely to maintain a performance edge over growth assets in that environment
Now, where have rates gone with inflation right now? So I tried to update this chart today, but these measures actually don't update till the end of the day. When I looked, the market-implied inflation expectation rate was still around two, so this is accurate, but the 10 year Treasury is actually closer to 1.72 now than 1.62. So you can see the market's implied belief in inflation is kind of slowly moving up, whereas the actual treasury rates, the nominal rates are really spiking hard. So that could indicate again, as I mentioned earlier, we are seeing rates being pulled up by a mix of not only inflation expectations, but also economic growth expectations as well.
Mike: Hey Doug, with regard to that spread, I think it's important to realize when we talk about the government artificially manipulating rates, what we would normally expect to see. Would this be an example of a negative, real return?
Doug: Yes. Yes. Right now it would be, yes.
Mike: Right, because you're buying ten-year securities that are paying less than inflation. Normally these would be reversed, and 1.5% to 2% spread going the other way.
Doug: You can see it right here. Here's the nominal rate versus the inflation rates. You have the positive, real yields there.
Mike: Yeah, as Doug said earlier, Jay Powell yesterday said with a straight face, and I think he had to practice that in the mirror before the meeting, that he didn't see much inflation, and if he did, it was going to be transitory.
That might be true about inflation, but the market has a way of adjusting interest rates and we know with a long history, what the normal spread is, and the overall market expectation is that they're going to slowly allow that yellow line to keep gradually moving higher. And it should be because right now the only guaranteed loss in town is to buy what's normally the safest asset, which are Treasury bills. Because you got to pay taxes and inflation,
Doug: And we've mentioned before also that the market can probably handle higher rates. It's just, how quickly does it happen? Right now, with these days where we're seeing the 10 year Treasury move up 10 basis points in the day the market's getting a little bit of indigestion, so to speak. Particularly on the growth, and you can see this very clearly here. So this is a year to date chart that shows value factor ETF in orange here. So up almost 20% year-to-date versus the NASDAQ triple Qs, which is just barely positive. And then you have the 7 to 10-year Treasury Bond all the way down here at the bottom, which is kind of a proxy for the ten-year treasury down almost 6% with the rate move.
What you can see here is that this point right here, where growth starts to roll over and then this line really starts to get going down south. When it starts to move, this starts to move, and that indigestion that I mentioned before, you're specifically seeing it now in the NASDAQ, as they're trying to grapple with repricing some of those asset classes with the idea of higher rates.
We've definitely positioned portfolios to be more on the value side, and that's certainly been a tailwind as we've seen this rate volatility and, for the foreseeable future, we would expect that to continue.
So, one of the other things we wanted to touch on today was discussing some of the behavioral biases that investors face. These aren't new, or they haven’t popped up since the beginning of last year, but we think some of them have been exacerbated further and led to some of the conditions that we're seeing right now. So we want to just touch on a few of these. We'll probably put together a more comprehensive presentation focused on behavioral biases here in the next few weeks, and we'll certainly let when we get that out. But for now, let's start with the recency bias. So this is the tendency for an investor to weigh recent information more heavily than anything else. So if you think back to 2020, for a majority of the year, the dominating return factor was mega cap tech NASDAQ, and that had been the dominant theme for the greater part of the decade, along with some of these other ones. I think that investors just got really comfortable with the fact that these trends will not change at all. So just to name a few here, you have: rates can't go up. Well, rates are going up now. Tech is indestructible. We're seeing a little bit of wobble there. Foreign stocks never performed well. Foreign stocks have paced US stocks pretty closely over the past six months. And then 2020 is the new normal. So basically a series of outlier events in one year is going to be what the market's going to look like for the next decade.
So what happens is investors take these themes and they readjust their portfolios to reflect those and put undue risk on themselves. So I understand that it's probably hard to read this chart in all these numbers, but this is what we call a quilt chart, and it goes back to 2006, basically ranks all of the major asset classes in the marketplace by return. What we did here was just show an extreme example of how this can play out. So the line that you've got running through in these white boxes is simply an asset allocation. So it's a, I believe a 65/35 weighted portfolio it's rebalanced annually. So for an investor who just followed that strictly, very hands-off, the annual return over that time period was 6.7%. So pretty normal return.
Now, the recency bias return would be if an investor would have taken a hundred percent of their assets and invested it solely in the asset class that performed the best the year before, their annualized return over that time period would have been -0.55%. So think about what the market's done over the past 15 years. It's done pretty well, and to generate a negative return over that time period with a strategy like that is kind of crazy. There's probably a lot of recency bias being implemented in the market right now, and it will be interesting to see how that continues to play out if these trends continue to move in opposite directions.
So next is the confirmation bias. This occurs when people observe, overvalue, or actively seek information that confirms their claims while ignoring or de-valuing the evidence that discounts their claims. Now, normally we stay away from politics with a 1000-foot pole, but we're going to pick on both sides of the aisle here, so we're fair game. There's no scientific study around this, but everyone can agree that if to the Republican side, you may view Fox News. If you lean to the Democratic side, you're more inclined to watch MSNBC. And why is that? Because those networks generally cover topics that reinforce beliefs of each side of the political aisle, and what happens is that we never really get the other side of the story, so to speak. For us, when we have investment thesis or ideas, and we're searching for articles or research, and we're starting to see a lot of people agreeing with us, that gives us a little bit of pause and says, okay, maybe we need to take a step back and find the other side of this to understand the pitfalls and the risks. And another thing in the market that leads to confirmation bias is price. There's a saying that price affects sentiment more than anything else. And that some of the pricing that we saw last year and into the tail end or into the beginning of this year has certainly caused some investors to maybe move into some asset classes that have been a little bit more risky than they expected.
Finally, something called the anchoring bias. This is when an individual buys a stock or an investment and they anchor themselves to the previous purchase price of that stock or investment. So a lot of times we’ll hear investors who simply don't want to sell something at a loss, believing that if they do that, they're going to lock in that loss forever, and there's no way to get it back. When the reality is that if you have found a better option, and you simply sell that position or that stock and move to something else, if that new position performs well, then you haven't locked in that loss. You've actually regained it, and you could even perform a little bit better. Now to kind of show this in practice here, this is a real company chart that I’m showing from the past 10 years. I’ll give everybody five or 10 seconds to look at it and see if they can guess what it is, and then iI’ll let exactly which company this is.
All guesses are in.
So this is GE, and I’m sure a lot of people over the past 10 years have looked at GE and said “I know GE has gone through some problems, but I bought it at pick a number, and I don't want to get rid of it. I have to wait until it comes back.” Well for a majority of folks those purchase prices that were done around here, they're still underwater, and looking at this area and what the market did during that time, the investment could have been sold, moved somewhere else, and that loss recouped. I don't want to pick on GE or GE investors. That's just the company that we used in this example. So anchoring biases is important to understand so people don't get caught up in the idea that they can't “adjust their investment thesis” if the facts were to change.
Now, lastly, this is a chart that we ended with last time, but it's so amazing that I want to show it again. Think about the biases that we just talked about. Confirmation bias, recency bias. So in order for an index, this is Goldman Sachs’ non-profitable tech index, to get an index filled with companies that don't make any money to have this type of return profile, you have to have these biases working overtime in some of these conditions. Now, what I can say is that, if you look at kind of the mega cap tech names, since probably September 1st, a lot of them have just gone sideways.
What I can almost guarantee you is that a lot of investors who put money to work in this area here are going to, or already running into anchoring bias issues right now. Because they've purchased things that on the surface were risky to begin with, but they saw the price was going up. They confirmed with reading things, looked at their opinions, and they just could not help themselves, but now as rates are going to move up, this line could look a lot different than it is right now, going straight up. So again, it's important to just recognize these. Every investor fights them. We fight them here, but recognizing them and doing what you can to overcome them is an important aspect of being a good investor and being a good portfolio manager.
So Mike, we've got one or two questions that have that have come in. One I’ll go ahead and address right now. So the first was “Does HCM consider using any kind of put strategies to protect investor portfolios?”
So, I think that using options can be a valuable tool. On a firm-wide basis, it's hard to implement something like that across the entire book. But we certainly have looked at individual cases and said, “okay, the client’s concerned about this, what are the options?” and puts, certainly been available.
What I found though is, 9 times out of 10, we go through the process of laying out everything, and then the client sees the cost of the put and they balk. Because it is an expensive proposition to use, to ensure almost all of the equity risk in the portfolio. But what I would say if that’s something you're interested in, please reach out to your advisor and we can give you a more detailed breakdown of what that might look like.
Mike: I would add to that, while we do that in select situations, we would and have and currently, on the fixed income side, have incorporated managers that have the ability to do those types of things. Most of our risk management is done through asset allocation. So we will increase or decrease equity exposure, or as most of this presentation has discussed, managing the risk within asset classes with the growth assets being the most expensive, and falling out of favor based on the cycle and reweighting the portfolio towards the value side, where valuations are better in the cycle favors that.
There are different ways to accomplish that goal, and I would say we dabble in all of them. As I said, in the fixed income side, we have some active managers now that we have the ability to do those types of things. For the reasons that you've seen when we showed interest rates, we need to be able to manage a rising interest rate environment with tools like that.
Doug: And then the last question: Are you concerned at all that that the current value trade has “been priced into the market” with the moves that we’ve already seen? One thing that's come out of this is that return profiles have been condensed in a tremendous fashion. So you're seeing returns that normally would take months and or years to play themselves out happening over the course of weeks. So it makes you take a step back and say, “all right, has all this actually taken place?” but I go back to some of those charts that we looked at earlier. Specifically, the one that shows the NASDAQ versus the S&P 500, and I think that if we continue to see the type of economic activity that we're seeing now, and that we expect in the future, I think that portends to even further moves for the value side. I don't think it's going to be a straight line, and there certainly could be fits and starts to it, but certainly over the next few months, value still has some room to run. The other aspect of seeing those returns condensed so much is the willingness to be more nimble then than you'd normally be, and maybe trading a little bit more taking advantage of profits when they're available, knowing that they could manage as quickly as they,
Mike: I don't think I have anything to add to that other than historically, we know that these periods of relative outperformance, as Doug said , although it can not going in a straight line, often last a decade or more. So as long as the economic trend favors this style, even though it has gotten a good jumpstart, our considered opinion is that we will certainly do no worse and likely better by having the overweight in the value side.
Doug: It looks like we just had one more question come through. Does HCM have a growth portfolio? So we actually do have an offering that tends to lean more on the growth side, and if you're interested in that, please speak reach out to your advisor and we can get you the details.
Mike: So just briefly for people that don't know, we run three all-stock portfolios. The dividend growth portfolio is the one that you hear the most about because it's so aligned with our mission of helping people plan for retirement and creating reliable income streams. But we also run a portfolio an all-stock portfolio that's dedicated to growth and another that is built around ESG concepts, and those are all used to compliment our diversified portfolios that are typically built from Exchange Traded Funds.
Okay. Well, I think that does it everybody. So thank you all for participating in our call today. Unless news breaks in some way, our next event is scheduled for Thursday, April 22nd.
And hosting that meeting will be our own Casey Boland. I will not be here for that meeting. Casey and Eoug will be hosting and doing a great job, I’m sure.
And as always, if you have any questions between calls feel free to give us a buzz. If you know somebody who's planning for retirement that we can help, go ahead and connect us. We'll help any way that we can.
And that does it. Thanks for joining us, everybody. Bye bye.